Landlords worried about full rent refunds to tenants due to non-consented work can take hope from a new High Court ruling that challenges the precedent.

By Miriam Bell

Over the last 18 months, a High Court judgment issued in 2013 has been creating nightmares for landlords – since it was cited as authority in the now-notorious Vic Inglis case.

Inglis is a Dunedin landlord who was ordered to refund $10,000 to a former tenant on a legal technicality relating to previously unknown non-consented work on the property.

The Tenancy Tribunal adjudicator in the case looked to the High Court ruling in the Anderson v FM Custodians case.

This ruling determined that unconsented premises don’t meet the definition of “residential premises” under the Residential Tenancies Act – and that means they are regarded as “unlawful tenancies” and not within the jurisdiction of the Tribunal.

Even though the Tribunal’s order in the Inglis case was overturned by the Dunedin District Court, anecdotally it has led to an increase in the amount of rent clawback claims at Tribunal level.

It also highlighted the uncertainty created by the FM Custodians ruling which has, reportedly, led to a number of full rent refunds to tenants in “unlawful tenancy” situations.

But a new High Court ruling, which disagrees with the FM Custodians decision, means the situation is changing, delegates at the weekend’s NZ Property Investors Federation conference were told.

NZPIF executive officer Andrew King said that the judge in the recent High Court decision found it to be ridiculous that unconsented premises should not fall within the domain of the Tribunal – and said they should.

That leaves the Tribunal with two different High Court rulings on unconsented properties to choose from, he said.

“I don’t know which way the Tribunal is going to go but I am pretty sure they are going to go the right way because it makes sense as the first High Court ruling is absurd.’

In her conference presentation, Tenancy Tribunal chief adjudicator Melissa Poole then confirmed the new decision [on the Patel and Weir case] gives the Tribunal the room to say the High Court disagrees on this issue.

She says the Tribunal prefers Justice Cook’s opinion that says they do have jurisdiction which enables them to look at the nature of the breach.

“For about three weeks we were all really excited, because we finally thought we were on dry ground and we could go back to applying RTA as it’s supposed to be applied.”

Unfortunately, two weeks ago Poole got notice that the case is being appealed to the Court of Appeal which means it’s not over yet.

In the meantime, the Tribunal has a decision which says they can continue to exercise their jurisdiction under the Act, she said.

“We can say ‘landlord you are in breach of Section 45 here’ and order compensation, exemplary damages, or whatever.

“But I’m not going to order the entirety of the rent to be paid back unless it was one of those situations where, and this is a real example, the landlord had rented out a shipping container with no plumbing.

“The electricity was in the form of an internal extension cord, and the roof leaked so that when it rained the water was running down the extension cord. Those are the situations where actually the rent should be awarded back.”

Poole added they will have to see what the Court of Appeal does. “But, at this stage, it looks as though the situation will return to normal and we will have the full scope of the RTA back to deal with these sorts of situations.”